Executive Summary

Record Q2 revenue of $30.9M (+12.4% YoY) with mix shift toward higher-margin software and services (40% of revenue), expanding gross margin by 210 bps to 25.1%; GAAP diluted EPS was $0.11 (+16.9% YoY) and non-GAAP diluted EPS was $0.13 (+19.6% YoY) .
Hardware revenue declined 13% YoY as mix shifted; GAAP operating income fell 32% YoY to $1.3M and adjusted EBITDA declined 9% YoY to $2.5M despite higher gross profit, reflecting higher operating expenses and integration costs .
Management issued Q3 guidance: revenue $27–$29M and adjusted EBITDA $2.0–$2.3M, positioning for sustained margins while absorbing acquisition mix effects; DPSI also paid down $4.3M of MIS-related debt during Q2 on strong cash generation .
S&P Global consensus estimates were unavailable for DPSI; external media reported Q2 EPS of $0.13 vs. $0.11 a year ago and revenues topping estimates, but treat non-SPGI sources as secondary for estimate comparisons .

What Went Well and What Went Wrong

What Went Well
- Software and services mix surged to 40% of revenue (vs. 17% a year ago), driving gross margin expansion to 25.1% (+210 bps YoY) as MIS acquisition boosted higher-margin services .
- Record revenue of $30.9M (+12.4% YoY) and non-GAAP diluted EPS of $0.13 (+19.6% YoY) despite integration spending; gross profit rose 22.5% YoY to $7.7M .
- CEO on MIS strategic impact: “acquired Macro Integration Services (MIS)… shifted our mix towards higher gross margin software and services and gave us significantly deeper presence in the retail vertical, especially grocery and food service” .
What Went Wrong
- GAAP operating income declined 32.1% YoY to $1.3M as operating expenses, notably G&A ($3.9M vs. $2.0M YoY), rose with scaling and integration costs .
- Adjusted EBITDA fell 9.4% YoY to $2.5M despite higher gross profit, reflecting higher OpEx and integration-related items .
- Hardware revenue decreased 13.0% YoY to $19.7M as mix shifted away from hardware toward services, pressuring volume leverage in the quarter .

Financial Results

Metric	Q2 2022	Q1 2023	Q2 2023
Revenue ($USD Millions)	$27.5	$27.0	$30.9
Gross Margin (%)	23.0%	22.4%	25.1%
GAAP Diluted EPS ($)	$0.09	$0.11	$0.11
Non-GAAP Diluted EPS ($)	$0.11	$0.16	$0.13
Operating Income ($USD Millions)	$2.0	$1.2	$1.3
Adjusted EBITDA ($USD Millions)	$2.7	$2.2	$2.5

Segment revenue mix

Segment	Q2 2022	Q1 2023	Q2 2023
Product/Hardware Revenue ($USD Millions)	$22.692	$22.166	$19.746
Services & Software Revenue ($USD Millions)	$4.814	$4.873	$11.166

KPIs and balance sheet highlights

KPI	Q2 2022	Q1 2023	Q2 2023
Gross Profit ($USD Millions)	$6.327	$6.050	$7.748
Cash & Cash Equivalents ($USD Millions)	n/a	$17.975	$7.225
Short-term Debt ($USD Millions)	n/a	$1.003	$1.003
Long-term Debt ($USD Millions)	n/a	$11.142	$6.891
Weighted Avg Diluted Shares (Millions)	7.691	7.789	7.935
Cash from Operations (YTD, $USD Millions)	n/a	n/a	$5.008 (YTD)

Notes: DPSI reported paying down $4.3M of MIS-related debt in Q2 .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance / Actual	Change
Revenue	Q2 2023	$29.0–$31.0M (issued 5/15/23)	$30.9M actual	Beat vs guidance (near high end)
Adjusted EBITDA	Q2 2023	$1.5–$1.8M (issued 5/15/23)	$2.5M actual	Beat vs guidance (above high end)
Revenue	Q3 2023	n/a	$27.0–$29.0M	New
Adjusted EBITDA	Q3 2023	n/a	$2.0–$2.3M	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2022 and Q1 2023)	Current Period (Q2 2023)	Trend
MIS acquisition & integration	Q1: MIS expected to add ≥$12M revenue and >$1.2M adj. EBITDA from Q2 onward . Q4: plan to acquire 1–2 companies to drive growth .	MIS closed at start of Q2; shifted mix toward higher-margin services/software and deepened retail presence (grocery, food service) .	On track; transformative mix shift .
Services mix & gross margin	FY22 services +19% YoY; intent to grow recurring services/consumables and invest in IP (Vision portal) . Q1: services +17.7% YoY; reinvestment in Vision portal and sales resources .	Services/software revenue +132.6% YoY; services+software now 40% of revenue; gross margin +210 bps to 25.1% .	Improving margin profile via mix .
Retail vertical strength	Q1: strong retail projects contributing to growth .	Deeper presence in retail vertical, especially grocery and food service, via MIS .	Expanding vertical exposure .
Cash & leverage	FY22 cash from ops $12.3M; planned M&A to drive 2023 growth . Q1: cash and debt up ahead of MIS close .	Paid down $4.3M of MIS-related debt by quarter end on strong operating cash flow .	Deleveraging post-acquisition .
Hardware trajectory	Q1: hardware +43.6% YoY on project strength .	Hardware -13.0% YoY as mix shifts to services .	Moderating hardware as services scale .

Management Commentary

“We continued to execute on our proven growth model during the second quarter, benefiting from the upside synergies of our past M&A and cross-selling activities. Additionally, we acquired Macro Integration Services (MIS) at the beginning of the quarter, which shifted our mix towards higher gross margin software and services and gave us significantly deeper presence in the retail vertical, especially grocery and food service.” — Steve Smith, CEO .
“Looking to the third quarter, we are targeting $27.0 to $29.0 million in revenue … and adjusted EBITDA in the range of $2.0 to $2.3 million.” — Steve Smith, CEO .

Q&A Highlights

Focus on MIS integration synergies and cross-selling opportunities across retail, with management emphasizing the mix shift benefits to margins .
Discussion of sustainability of services-driven gross margin improvements and visibility into the pipeline supporting Q3 guidance .
Clarifications on operating expense increases tied to scaling and integration activities (consistent with higher G&A in Q2) .
Capital allocation and deleveraging cadence post-MIS, including Q2 debt paydown and cash generation trajectory .

Note: External transcript sources cited above; full transcript retrieval via the Read tool was unavailable due to a document retrieval error.

Estimates Context

S&P Global consensus estimates for DPSI were unavailable in our tool at the time of analysis, so vs-estimate comparisons anchored to SPGI cannot be presented. Please treat third-party media as secondary sources.
External media reported Q2 earnings of $0.13 per share (vs. $0.11 a year ago) and revenues topping expectations; DPSI’s non-GAAP diluted EPS was $0.13 and revenue was $30.9M as reported by the company .

Key Takeaways for Investors

Quality of revenue improving: services/software mix at 40% drove 210 bps gross margin expansion; expect margins to benefit as MIS services scale .
Mixed P&L optics: despite record revenue and higher gross profit, GAAP operating income fell 32% YoY and adjusted EBITDA declined 9% YoY on higher OpEx/integration costs—watch operating leverage as integration matures .
Hardware softness is by design as mix shifts; services strength should sustain gross margin tailwinds if pipeline and cross-sell keep converting .
Q3 guide implies sequential revenue moderation from Q2’s record quarter (to $27–$29M) with adjusted EBITDA of $2.0–$2.3M; monitor order timing and retail project phasing .
Balance sheet discipline evident with $4.3M debt paydown in Q2 post-acquisition; cash from operations YTD of $5.0M supports deleveraging .
Execution bar rises: having beaten Q2 guidance on both revenue and adjusted EBITDA, management must sustain services mix and control OpEx to re-accelerate operating income and EBITDA growth .
The narrative likely pivots around MIS synergy capture, services-led margin durability, and sequential revenue cadence into Q3; upside if services momentum offsets hardware volatility and integration costs abate .

Citations: Company 8-K press releases, financial tables, and reconciliations ; prior-quarter releases for context ; external transcript/coverage for call Q&A and media estimate framing .

DecisionPoint Systems, Inc. (DPSI)·Q2 2023 Earnings Summary